In a new study, researchers at Florida Atlantic University and Florida International University claim that Detroit has surpassed Atlanta as the most expensive housing market in the U.S., after the city topped the list of inflated housing markets for more than a year.
As of the end of May, data from the Top 100 U.S. Housing Markets indicates that homes in the Detroit metro region are 40.79% overvalued in relation to their long-term pricing patterns. Atlanta is the second most inflated housing market in the nation, with housing premiums there being an estimated 40.37% overvalued.
“Detroit’s rise as the most overvalued housing market in the country is likely due to new household formation,” said Ken H. Johnson, Ph.D., Real Estate Economist in FAU’s College of Business. “While population growth is relatively stagnant in the area, people are starting to leave their current households to form new ones, placing pressure on a housing market that simply does not have enough units to support this new demand.”
Examining the Top U.S. Housing Markets for 2024
As a component of FAU’s Real Estate Initiative, the Top 100 U.S. Housing Markets uses publicly accessible Zillow data to determine how overvalued or undervalued the typical home is in the 100 most populous metro areas in the nation. In order to determine a premium or a discount, Johnson and colleague researcher Eli Beracha, Ph.D., director of FIU’s Hollo School of Real Estate, compare a city’s actual average selling price to its statistically predicted average selling price.
Just two locations—Honolulu and New Orleans—are dealing at a discount, compared to 98 other cities in the research that are selling at a premium.
Top 10 Housing Markets in the Study by Premium/Discount
- Detroit (40.79%)
- Atlanta (40.37%)
- Las Vegas (37.53%)
- Knoxville, TN (37.33%)
- Cape Coral, FL (36.11%)
- Tampa, FL (35.98%)
- Charlotte, NC (35.09%)
- Palm Bay, FL (34.94%)
- Orlando, FL (34.29%)
- Lakeland, FL (34.06%)
Roughly half of the top 10 housing markets examined in the study were located in the “Sunshine State” of Florida. However, the chilly Detroit metro topped the list.
“Rents are still growing in Detroit, signaling that home prices are likely to continue to grow for the near future. Detroit, however, does not have the same factors of supply and demand as South Florida and other parts of the Sun Belt where the housing market is bolstered by rampant demand from newcomers and population growth to sustain their housing prices,” Johnson said. “Eventually, prices will return to their long-term trends, but how they get there is the open question—will prices crash as they did after the last housing cycle’s peak or will home prices flatten out and slowly work their way back to the area’s trend. It will be one of the two.”
According to the Top 100 U.S. Housing Markets, several of the nation’s most expensive real estate markets have already started to return to their long-term pricing patterns. Austin is one such market that has already begun to stabilize again; at the moment, properties in the metro region are 11.72% overpriced, compared to the market’s peak of 46.70% in June 2022.
“Housing prices can and will re-stabilize. The only question is how local home prices will return to a given area’s long-term pricing trend,” Beracha said. “Will it be quickly with a precipitous fall in home prices extinguishing all worries of affordability? Or will prices flatten and slowly return to the area’s long-term trend sustaining equity values but creating considerable affordability problems?”
The Top 100 U.S. Housing Markets, according to both researchers, aims to provide information about housing markets across the nation so that consumers, sellers, real estate agents, and legislators may make better educated real estate decisions.
“Ideally you want a housing market’s prices to remain close to its long-term pricing trend with only limited fluctuation around the trend. Unfortunately, the last two housing cycles have been typified by dramatic swings in prices above and below markets’ long-term pricing trend,” Beracha said. “As a result, we are continuously worried about either wealth loss from home price declines or prolonged periods of unaffordable housing.”
To read the full report, including more data, charts, and methodology, click here.
